If Logistics Outsourcing was such a winning strategy, why isn’t every company doing it, and why is it that so many logistics outsourcing partnerships terminate prematurely?

The answers to both of these questions may well be connected not with the true value of logistics outsourcing as a concept, but with the frequency at which companies make mistakes when planning and implementing outsourcing initiatives.

Want to Know the Right Way to Outsource Logistics?

Logistics Bureau has completed more than 100 successful logistics outsourcing projects, some for clients that had previously experienced unsuccessful relationships with third-party logistics providers.

As a result of our experience, we’ve seen just about all of the traps, pitfalls, and faux pas that can wipe out the anticipated benefits of logistics outsourcing.

In this post—which will build up over the coming months into a comprehensive guide—we’re going to share some of our logistics outsourcing knowledge and insights.

We hope you’ll be able to use this guide to ensure your company makes the right outsourcing decisions, so if and when you contract-out your logistics activity, yours will be a story of success rather than sorrow.

Our logistics outsourcing guide will be published in parts, right here on this page. In order to access all our secrets to outsourcing success, you’ll need to stop by each month and read the latest installment.

Logistics Outsourcing Secret #1: The Practice of Patience

If you’re chomping at the bit to outsource a warehouse or transport operation, we understand your frustration, but we make no apology. Patience is required if you want to get full benefit from this guide, just as patience is required to be successful with logistics outsourcing.

In fact, patience is one of the most important principles of outsourcing—and one which many companies fail to employ.

Reading this guide in its entirety will be a step-by-step, six-month journey. That’s not dissimilar to the process and duration required to set up a logistics outsourcing partnership—if it’s to be done with the right degree of diligence, and hence offer the best chance of long-term success.

As our guide unfolds, the reasons for recommending a four-to-six-month outsourcing-project timescale will become evident, but for now, you can consider the following statement as the first of our outsourcing secrets revealed:

If you were expecting to outsource your logistics operation (or part of it) within a matter of weeks—as some organisations do—you’re probably setting yourself up for failure.

While on the subject of expectations, it should be noted that they play a large part in the determination of logistics outsourcing success, and so it would seem that this is a good topic with which to start our guide proper.

Here in Part 1 then, you’ll find a brief rundown of the main objectives and expectations companies form when they decide to outsource logistics activity.

Part 1: Logistics Outsourcing Objectives and Expectations

Aside from unrealistic timescales for implementation, there are a number of other ways in which companies can run into problems with logistics outsourcing. As hinted upon above though, the difference between success and failure is really just the difference between expectations and outcomes.

If you want to be sure of success therefore, you first need to be sure of what you expect—in other words, what you want to achieve from contracting out your logistics activity.

The following paragraphs outline some of the most common reasons that companies choose to outsource logistics, which might prove helpful if and when your company should consider it as an approach to business improvement.

Cost Saving: A lot of companies turn to logistics outsourcing as a way to trim costs from their business operations. Under the right circumstances, outsourcing can indeed save you money, but it may not do so if your company’s in-house logistics operation is even reasonably efficient.

Be careful then, about considering logistics outsourcing as a cost-cutting measure unless your existing operation is really under-performing and unlikely to improve.

An exception can be made to this rule if your company is a start-up and you don’t want to invest in your own logistics assets and workforce. That said, you must still take care to ensure outsourcing is the best solution when the total cost of ownership is considered.

Access to Competence: Most enterprises need some sort of logistics operation, but far fewer exist to operate logistics. That’s why for many companies, logistics outsourcing is a way to keep internal resources focused on what the business does best, whether that’s sales, manufacturing, or providing some form of service.

In some cases, a company may choose to outsource even when logistics is a core part of its business. This situation would typically arise when it’s found that a 3PL offers stronger logistics competences than might realistically be accessed internally.

Service Improvement: This is perhaps the most common of logistics outsourcing expectations. By contracting-out to a 3PL with the right capabilities, resources, and service ethic, your company might be able to leverage logistics to improve the customer experience, reduce service issues, and ultimately, generate more sales and greater profits.

Other Logistics Outsourcing Expectations

Costs, competence, and service are most commonly used as the rationale for logistics outsourcing, but there are others, any of which might be valid to your company’s mission and business strategy.

If your company decides to consider an outsourcing arrangement, ask yourself if your expectations are to save costs, access competences, improve service, or to achieve any of the following competitive advantages:

• Access to global capability
• Increased flexibility in your logistics operations
• Advantages of superior logistics technology
• Access to economies of scale
• Transformation from fixed-cost to variable-cost model

Setting realistic expectations is the very first step to a successful logistics outsourcing initiative, which leads nicely on to…

Logistics Outsourcing Secret #2: Expectation is a Benchmark

When you are clear on two or three primary goals for using a logistics service provider, you’ll be able to…

• Determine if logistics outsourcing is the right way to go
• Target the right potential partners and evaluate them accurately
• Make better choices regarding what to outsource
• Project your company as a desirable customer for 3PLs
• Choose the right partner from a realistic shortlist
• Negotiate a more effective outsourcing contract
• Put the right measures in place to track partnership performance

Expectation then, is the real benchmark by which outsourcing success is measured, and if your company’s expectations are based on incorrect projections or presumptions, your project could be in trouble before it even gets started.

That’s why it’s vital to know exactly what challenges you wish to address through logistics outsourcing, and why you might want to have some expert external help to establish the likelihood of outsourcing as a viable solution.

Bookmark This Post for More Logistics Outsourcing Secrets

Here in Part 1 of our logistics outsourcing guide, we’ve taken a brief look at the typical reasons for logistics outsourcing and the importance of holding clear expectations before deciding to contract your company’s logistics to a 3PL.

When outsourcing-objectives are not carefully explored and clarified, things can quickly start to go wrong, but now you know this secret, erroneous expectations should be no issue for your business.

However, setting realistic expectations is just the first step in getting logistics outsourcing right. In Part 2, we’ll look at some of the ways in which outsourced logistics can fall short of even the most realistic expectations (and why it can happen), while in Part 3 and beyond, we’ll focus much more on how to avoid traps and achieve the right outcomes from logistics outsourcing.

Best Regards,

Rob O’Byrne
Group Managing Director
Email: [email protected]
Phone: +61 417 417 307